We would all like to live long, fulfilling lives, in which we do not need to worry about all the contingencies and situations that may come our way. We should all, however, have a durable power of attorney and health care proxy, so that our financial and health care choices will not be placed at risk in the event we are unable to make them.
A durable power of attorney allows the designated attorney-in-fact to make financial decisions for you. Some durable powers of attorney are effective immediately, upon signature. This may come in handy in various circumstances, such as when someone is traveling and needs bills to be paid, or if an elderly person cannot easily go to the bank or write out checks. Other durable powers of attorney are effective upon the happening of some event, such as incapacity. This typically requires a medical opinion in order to be effective.
A health care proxy designates an agent to make health care decisions, in the event someone is unable to communicate with his or her physician. A health care proxy may also set out medical treatment that should or should not be provided in certain situations. This provision is known as a living will.
Many people believe that because they already have beneficiary designations, payable-on-death accounts or a will, that they do not need anything else. What they are failing to account for is that these documents, while very important, only become effective upon a person’s death. Without a durable power of attorney, someone could become incapacitated and leave a spouse or family member without access to funds, particularly retirement accounts and thus require expensive court intervention to do anything with the subject funds
These documents are critically important because they allow financial and medical needs to be met without probate court involvement. This means a family member or friend would need to petition the Probate Court for appointment as guardian or conservator, give notice, publish in the newspaper and obtain medical reports. Often this requires the report of a guardian ad litem, a third party appointed by the court to look out for the best interests of the incapacitated person. The process is time consuming and expensive, particularly over time, as it requires continued court involvement and filings. The court documents are also a matter of public record, exposing medical and financial information to the public.
By having a durable power of attorney and health care proxy, you no longer need to worry about any of these contingencies, because you have already planned for them. If the need ever arises, your loved ones will immediately have the ability to handle your affairs.